Home Equity Loans vs. Home Equity Line of Credit

Home equity loans and Home Equity Line of Credit (HELOC) are different ways to do the same thing—use the equity you have built up in your home to help pay for things you need today. Let’s break down home equity loans vs. HELOCs to see what might work best for you.

The differences explained

It’s no secret that home prices have gone up.  As a homeowner, you may have equity built up in your home. If so, then both Home Equity Loans and HELOCs are viable options to pay for large purchases, such as home improvement, college tuition, or that vacation you’ve been dreaming of. Let’s take a look at how each option works and which loan type might best meet your financing needs.

What Is a Home Equity Loan?

Equity is the amount your property is currently worth, less the outstanding amount you still owe on your mortgage on the property. It’s the portion of your home’s value that belongs to you. If you have been paying down your home for a while and its value has appreciated, you may hold a significant amount of equity in your home.

A home equity loan allows you to tap this equity directly. Also known as a second mortgage, a home equity loan allows you to borrow an amount equal to a portion of this equity, using your home as collateral for the loan.

With a home equity loan:

• You receive the amount you borrow as a lump sum that you can use as you see fit
• You repay at a fixed rate for the term of the loan
• You continue to make repayments on the balance of your original mortgage

Home equity loans allow you to make a fixed payment for the full term of the loan, which can extend up to 30 years.

The main risks of a home equity loan are:

• If your home’s value falls, you might owe more than your equity is worth
• If you are unable to make payments on either loan, you are at risk of losing your home

What Is a HELOC?

A HELOC also allows you to borrow against the equity you have built up in your home, but the money is offered to you as a revolving line of credit. This means it works more like a credit card, where you can borrow smaller amounts of cash as you need up to the limit of the portion of your equity you were able to borrow against.

With a HELOC:

• You borrow small amounts up to a set limit for an agreed “draw” period
• You make minimum payments and pay interest only on what you have borrowed
• After the “draw” period ends you’re required to start paying the full balance of the loan

HELOCs allow you to borrow money as and when you need it and to repay only a minimal amount of what you have borrowed, often only the interest charged. Once the draw period ends you’ll need to repay the balance all at once, or over a period of up to 30 years or more.

While the variable rate might be fixed for the draw period, if rates rise, it may jump sharply at the end of the draw period. You may face “balloon” payments as well, to make sure you’re able to repay what you owe within the agreed term. Or you might incur prepayment penalties if you want to pay off the line of credit before the end of the term.

The main risks of a HELOC include:

• Payment shock when higher rates are applied at the end of the draw period
• Owing more than your equity is worth if your home’s value falls
• Losing your home if you’re unable to pay off either your line of credit or your mortgage

Why Borrow?

The big advantage of both home loans and HELOCs is that, because they are secured by your home, they offer very competitive rates compared with other forms of lending. This makes them a good source of money for those big projects you would like to get done.  That said, the type of borrowing you choose depends on your specific situation.

Choose a Home Equity Loan If…

• You’re looking for a large lump sum for a one-time expense such as a wedding or a major home renovation project
• You’re happy to pay down a loan for a long period at a steady rate

Choose a HELOC If…

• You need easy access to money to pay for smaller expenses or emergencies
• You are able to make regular repayments to keep your balance in check

HELOCs offer low fees and interest rates and can be a good way to pay for necessary expenses that would overwhelm your credit cards, such as unforeseen medical bills or starting a small business. However, don’t be tempted by interest-only payments for the first few years. You must be able to keep your balance in check to avoid far higher costs down the line.

Click here to see how home equity loan and HELOC borrowing costs stack up. 

Smart Home Equity Options With Argent Credit Union

At Argent Credit Union we offer our members flexible options for tapping into their home’s equity to pay for the things your family needs today.

Our home equity loans feature:

• Fixed-rate loans starting at $10,000
• Terms between 5 and 10 years
• Borrowing up to 90% of your home’s equity

Our HELOCs feature:

• Flexible loans starting at $10,000
• Borrowing up to 90% of your home’s equity
• Take out only what you need
• No closing costs*  

Whatever your borrowing needs, Argent Credit Union is here to help you make the best decision based on your financial situation.

Click below to learn more about our home equity financing options.

Home Equity Loans and HELOCs

*No closing costs. If you close your line of credit within thirty-six (36) months, you will be required to reimburse the Credit Union for closing costs paid on your behalf. These fees generally total between $400 and $1,000. If you ask, we will provide an itemization. Limited time offer.

NMLS #421982

Why Join a Credit Union? Here Are 10 Reasons

Why join a credit union? Local, member-owned financial institutions have deep roots in many American communities and provide a flexible, more accessible alternative to large commercial banks. We take a look at what credit unions are, how they work, and the key reasons many consumers still prefer them to larger for-profit banks.

What Is a Credit Union?

Credit unions are cooperative financial organizations owned jointly by their members. Everyone with an account has a share in the ownership of the credit union. As a member, you are both an owner and an investor in the credit union’s success. 

Credit unions typically have roots deep in local communities and were often started when employees at a company, government office, or school pooled their financial resources in order to access affordable banking services and credit. Since then, many credit unions have banded together or extended their reach, but the feel of community remains core to their identity.

How Do Banks and Credit Unions Differ?

Credit unions are not-for-profit organizations, meaning that they are run on behalf of their members, not shareholders, and any excess funds are reinvested in the credit union. Services are provided more or less at costs, rather than seeking to maximize returns from every transaction.

Banks, on the other hand, are “for-profit” organizations that sell services to their customers to benefit their owners, or shareholders. Shareholders also control the board that decides how the bank is run. While most started as locally owned companies, almost all banks are now part of big regional or national corporations with few connections to any individual communities.

Credit unions are also regulated differently than banks. They need to keep more of their reserves on hand, rather than in “at risk” investments and they also need to maintain a stake in the loans they grant, rather than being able to repackage and resell loans, as banks do. This means that more credit unions’ assets remain in the hands of their members.

Why Are Credit Unions Important?

Credit unions provide crucial access to safe, well-regulated financial services in many communities, especially for people just starting out on their financial journey or those in service professions including teachers and local government staffers, as well as healthcare and utility workers. 

True to their roots, credit unions also provide services in places commercial banks do not.

Today, almost 5,000 credit unions across the U.S. together manage $2.17 trillion in member assets. According to the National Credit Union Administration (NCUA), the sector now extends loans on family residential properties worth almost $660 billion and $486 billion worth of auto loans on both new and used cars, accounting for almost 1 in 3 auto loans extended in the U.S.

Why Should You Join a Credit Union?

Let’s take a look at what member ownership, not-for-profit status, and local connections mean in practice. Here are 10 good reasons why you should join a credit union.

1. Low Fees

With no incentive to maximize profits at every stage of the banking process, credit unions offer many services at cost or are able to eliminate many fees commonly charged by banks. Expect to pay low or no monthly and annual service charges as well as fewer checking, cash advance, and overdraft fees. Loan application and processing fees are also less common.

2. Lower Minimum Balances

Similarly, with less need to support investments on the open markets, credit unions often require members to keep less money in their deposit accounts. That means more checking, savings, and money market accounts with no or very low minimum balance requirements.

3. Higher Interest Yields 

Unlike banks, credit unions do not need to maximize the difference in rates between the interest they charge on commercial loans and the money they borrow from you to make profits for themselves. That means money in your savings, money market, and share certificate accounts will earn a higher annual percentage yield (APY).

4. Lower Interest Rates

It also means credit unions do not need to charge as much on the money they lend to members in the form of annual percentage rates (APRs) on personal, auto, and home loans, credit cards, lines of credit, home equity financing, and even business loans. Members win on both ends!

5. More Flexible Terms

Without the need to maximize profits, credit unions are also able to be more flexible on the terms they offer when making loans. Depending on your circumstances, credit unions may be willing to lend money for longer or allow you to borrow against more of the value of your home or car.

6. Fully Insured Deposits

All this flexibility comes with the same built-in safety that deposits at commercial banks enjoy because the federally-backed NCUA insures individual deposits in every credit union up to $250,000. 

7. Great Local Service

Credit unions continue to serve the communities that created them. While they might have fewer locations than big banks, they are more likely to maintain branches in places where commercial banks no longer offer in-person service. Their smaller size also means you are more likely to be able to talk directly to a senior manager or the loan officer administering your loan.

8. Long-Term Relationships

Credit unions know they are more likely to succeed when their members thrive. The staff at your local credit union has an interest in getting to know you better and understanding your financial goals. At a credit union, you’re more likely to be recognized when you walk in the door, rather than having to start from scratch at every visit.

9. Financial Resources and Tools

That natural interest in members’ well-being means credit unions often also provide a host of financial resources and tools for their members from helpful blog posts and online mortgage calculators to webinars on home purchasing or investments. Many credit unions are also advocates for financial literacy, often supporting classes and programs in their communities.

10. Voting Rights

All this talk about member ownership means something. Being a member and owner means you get to vote on who sits on the volunteer board that oversees the operations of the credit union. You can even run for election to the board or various committees yourself!

Argent Credit Union: We’re Here for You, Richmond 

Argent Credit Union is a full-service not-for-profit financial cooperative owned and operated by its members. At Argent Credit Union, we return earnings to our members in the form of lower loan rates, higher savings rates, and fewer to no fees.

Created in 1956 to serve DuPont employees in Chesterfield, VA, the Argent Credit Union now serves more than 26,500 members throughout the Richmond metro area. Membership is open to anyone who lives, works, attends school, worships, or volunteers in Chesterfield, Henrico, or Hanover counties or the City of Richmond.

If you are looking for a Richmond credit union, please come talk with us. We’d love to get to know how we can serve your financial needs. 

Belonging at Argent

How to Get Pre-Approved for a Mortgage

So you’re ready to start house hunting and you’re thinking about the home loan you’ll need. But which should you do first: find your dream home or apply for a mortgage? 

Neither—the first thing you should do is figure out how to get your home loan pre-approved! Pre-approval means you’ll have a clear idea of your budget and realtors and sellers will take you seriously as a buyer. Read on to find out how to get pre-approved for a mortgage. 

Why You Need to Get Pre-Approved for Your Mortgage

Mortgage pre-approval is essential in a competitive housing market because it means you have financing ready to go, therefore sellers are more likely to pick you. Once your mortgage is pre-approved, you’re in a strong position to approach a realtor and start shopping for a home! 

Plus, the pre-approval process is a chance to learn key information that can help you on your home buying journey:

• Find out if you can qualify right away for a mortgage or if you need to wait until your finances are in better shape.
• Determine what annual percentage rate (APR) you’re likely to get based on your credit score, debt-to-income (DTI) ratio, and income.
• If needed, you can take steps to improve your credit before you officially apply for your mortgage.
• Find out the home price range you should consider to get an affordable monthly payment.
• Determine what type of mortgage best suits your situation and goals. For example, a fixed-rate vs. adjustable-rate mortgage (ARM) or a jumbo loan.

How to Get Pre-Approved for a Mortgage in Simple Steps

Here’s what to do when you’re ready to seek mortgage pre-approval:

• Find out your credit score and, if needed, take steps to improve it.
• Gather up all your personal and financial documents.
• Choose a lender you trust and can build a relationship with. 
• Hit the apply button and wait for a response from a mortgage originator!
• If pre-approved, you can discuss your loan type, amount, term, and likely rate.

Once you find a home and your offer is accepted, you can submit your final mortgage application. Your lender will take some time to check your credentials in the underwriting process. If all goes well, you’ll sign the loan contract and get the funds to buy your home.

FAQs About Mortgage Pre-Approval

You probably still have a few questions about how to get pre-approved for a mortgage, so here are the most common queries we get from people just like you.

How Is Getting Pre-Approved Different From Pre-Qualifying?

Pre-qualifying involves just a soft credit pull to take a quick look at your financial background, and you get ballpark figures only. Pre-approval uses a hard credit pull to assess in greater detail whether you can get a mortgage, the amount, and your likely rate.

Does Getting Pre-Approved for a Mortgage Hurt My Credit?

Your credit will drop a few points when a lender runs a hard credit check. The good news is, If you get pre-approved from multiple lenders within about 45 days, it counts as a single hard credit pull so your credit score will dip only once. 

Plus, your credit will recover once you start making timely payments on your home loan. 

How Long Does Mortgage Pre-Approval Take?

Depending on your lender, you may get a pre-approval response within one to three business days. Some lenders may take up to 10 days. 

Note that pre-approval is different from your final mortgage application, which begins the closing process on your home purchase. The closing process may take 30 to 60 days.

How Far Ahead of House Shopping Should You Get Pre-Approved? 

A mortgage pre-approval offer may be good for about 60 to 90 days so you want to aim to find your home within that window. Pre-approval is valid for a limited time because your finances and interest rates may change over a longer period. 

If your situation or the markets change, you may qualify for different loan amounts and rates.

What Documents Do You Need for Mortgage Pre-Approval?

Before you apply to get pre-approved, you should spend some time gathering these documents:

• State-issued ID and proof of address
• Bank statements 
• Tax returns from the previous two years
• W-2s, 1099s, and other proof of income from the previous two years
• Information about any other assets you have

Should You Shop Around Different Lenders?

Yes, it’s a good idea to shop around different lenders to find the most competitive rates, flexible terms, and friendly local service. Credit unions frequently offer affordable home loans because they are not-for-profit organizations that pass revenue back to members through lower rates.

Next Steps: Choosing the Right Mortgage for Your Needs

Now that you’ve learned how to get pre-approved for a mortgage, you’ll be better equipped when it comes to choosing a home loan. Keep in mind that a 30-year fixed-rate mortgage is the most popular. This is because it offers affordable payments that stay the same every month over a generous term. That said, it’s not the only kind of mortgage. 

If you have a higher income and a large down payment, you could choose a shorter term to save on interest. Or if you want an extra-low payment at the start of your loan term, an adjustable-rate mortgage could be right for you. Click below for details!

Home Loans

The Differences Between Credit Unions and Banks

Choosing between a bank or a credit union is an important decision that will allow you to manage your money better. While both institutions offer similar financial products such as checking and savings accounts, loans, and mortgages—there are fundamental differences between the two.

Read on to learn more about the differences between a credit union and a bank to determine which one is right for you.

Commercial and Non-Commercial

One of the primary differences between a bank and a credit union is their structure and ownership. A bank is a for-profit institution typically owned by shareholders or private investors. The primary goal of a bank is to maximize profits for the owners.

Credit unions are cooperative, not-for-profit financial institutions that are member-owned and operated. This structure can lead to a more member-centric approach to offering financial services and products. In contrast, the profit-driven focus of a bank can potentially affect product offerings and customer service.

A credit union is often formed around a shared connection, such as a place of employment, city or state of residence, or an affiliation with another organization like a place of worship. Credit union members can take advantage of lower loan rates, higher savings dividends, and lower fees than bank members.

Insured by the FDIC or the NCUA 

Bank deposits are insured for up to $250,000 through the Federal Deposit Insurance Corporation (FDIC). Similarly, money deposited in a credit union account is also guaranteed, but through the National Credit Union Administration (NCUA).

NCUA coverage protects members if the credit union were to shut down or go into conservatorship by providing federal deposit insurance of up to $250,000 per account holder. This insurance coverage ensures the stability and safety of credit unions, protecting members’ deposits from potential losses.

Fees vs. Low or No Fees

Banks often charge higher fees due to their profit-driven nature, while credit unions prioritize members’ needs and offer low or no fees for the same services. 

Examples include:

Account maintenance fees—Credit unions typically have low or no monthly maintenance fees for checking and savings accounts, while banks often charge a monthly fee if a certain balance or transaction requirements aren’t met.

Overdraft fees—Banks tend to have higher overdraft fees than credit unions, making them a more expensive option for members who accidentally overdraw their accounts. 

Credit unions sometimes offer overdraft protection for ACH, recurring debit card transactions, and checks, in which overdraft payments may be covered up to a set limit.

ATM fees—Banks frequently charge fees for withdrawing money from non-affiliated ATMs. Credit unions often participate in large ATM networks or offer reimbursements for out-of-network ATM fees.

Wire transfers and other financial instruments—Credit unions may provide low to no-cost wire transfers, cashier’s checks, and money orders, whereas banks often charge higher fees for these basic services.

Foreign transaction fees—When you use credit or debit cards abroad, banks often charge higher foreign transaction fees than credit unions.

Early account closure fees—Banks may impose an early account closure fee, while credit unions are less likely to do so.

Loan origination fees—Credit unions often charge lower loan origination fees than banks, making it more affordable for members to borrow money.

Credit unions aim to return profits to their members through better rates and lower fees, making them an attractive option for people looking to minimize banking costs. Furthermore, their member-centric approach fosters a sense of community, ensuring that customers’ financial well-being is at the forefront of the decision-making process.

Community Commitment

Credit unions consistently provide exceptional local service and demonstrate a strong commitment to the communities they serve. For example, Argent Credit Union supports several important local Virginia charities. Members also gain access to unique benefits, such as scholarships and fun perks like tickets to Busch Gardens and Water Country USA.

Being member-owned and operated allows Argent Credit Union to focus on building long-term relationships. As a result, Argent offers more attentive and personalized customer service than larger banks. Our smaller scale and local presence enable us to tailor our services and products to meet the needs of our members better.

Make the Right Choice for Your Financial Future

Now that you understand the key differences between banks and credit unions, it’s time to make an informed decision that best fits your financial needs. Explore the exceptional services, personalized attention, and lowered rates/fees offered by Argent Credit Union. 

Click below to learn more about the value and benefits of making Argent Credit Union your financial institution of choice!

The Credit Union Difference

Protect Yourself from Ransomware

Malware – There’s been a lot in the news lately regarding Malware attacks.  What exactly is it?  Simply put, Malware is “malicious software” designed to damage and destroy computers and computer systems. Cybercriminals typically use it to extract data they can leverage over victims for financial gain.

Ransomware is a type of malware that accesses a victim’s files, then locks and encrypts them, and demands the victim pay a ransom in order to get the files back. Cybercriminals use these attacks to try to get users to click on attachments or links that appear legitimate but actually contain malicious code.  Ransomware is like the “digital kidnapping” of valuable data – from personal photos and memories to client information, financial records, and intellectual property. Any individual or organization could be a potential ransomware target.

Here are some tips to help protect yourself:

• Keep the software on all of your Internet-connected devices up to date. Make sure you are running the most current versions of your security software as well as other frequently used programs and apps.
• Turn on two-step authentication – also known as two-step verification or multi-factor authentication – on accounts where available. Two-factor authentication can use anything from a text message to your phone to a token to a biometric like your fingerprint to provide enhanced account security.
• Protect your valuable work, music, photos, and other digital information by regularly making an electronic copy and storing it safely.
• Make sure to use a strong password with at least 12 characters. Focus on phrases that are easy for YOU to remember.
• If you doubt a link in an email, social media posts, and online advertising, don’t click on it.  This is often how cybercriminals try to steal your personal information. Even if you know the source, if something looks suspicious, delete it.
• USBs and other external devices can be infected by viruses and malware. Use your security software to scan them before saving anything.

Information provided by StopThinkConnect.org. #stopthinkconnect